The Impact of Oligopolies, Through the Eyes of

Beer

By Lachlan Black

In an increasingly competitive market, big Melbourne-based breweries; Carlton,

businesses are the major players within Castlemaine, Victoria, Shamrock, Fosters
different areas of the economy. So much and McCracken. The Society of Melbourne
so to the point that a handful of large Brewers formed in 1903 in an effort to
multi-national corporations take up the salvage the six breweries that made it
majority of a market share and exist whole. Each brewery was on the brink of
comfortably with one another. Such a closure, so merging together saved their
scenario can be called an Oligopoly. The businesses.1
large corporations that make up
oligopolies employ vast amounts of
people, contribute towards the local and
Australian economy, and can provide
infrastructure in areas that which
previously would not have said
infrastructure. However, what cost do
these companies have on local
communities? This argument has been
had before, however this time it shall take
place through the lens of a beloved
beverage: Beer.

Beer production in Australia has a vivid

and deep history. But the companies that
produced the beer changed overtime, as
too did the economic environment and
the demands of consumers. Such a (Figure 1: The Engine Room at the Victoria
Brewery, producing the fan favourite
company is Carlton & United Breweries
Victoria Bitter.)
(CUB), or originally, the Society of
Melbourne Brewers. This particular Carlton & United increased their market
brewer is an amalgamation of six different share after its formation, buying out

1
John Moloney, The Penguin Bicentennial History
of Australia: The Story of 200 Years (New York, The
Viking Press, 1987), 219.
competitors and expanding its business2.
This enabled the newly formed
conglomerate to expand its territory over
Australia and become increasingly
competitive with other beer makers.
Carlton & United were never a monopoly
of the beer production industry, however
this way of operating a company is similar
to that of an Oligopoly. When Oligopolies
exist within a particular market, external
monitoring agencies can experience
difficulty getting said oligopolies to
comply with worker demands and public
pressure.
(Figure 2: An newspaper excerpt showing
Carlton United Breweries not raising
workers’ wages.)
A reluctance to increase wages for
workers can have a detrimental impact on
said workers, as the cost of living at the
time was overly high and wages made a
relatively low.3 With wages being at a
2
Keith Deutsher, The Breweries of Australia (Port
Melbourne: Lothian Books, 1999),
3 5
Householder, ‘Cost of Living’, The Argus, 11 Jan.
1904, para. 1, <
https://www.fwc.gov.au/documents/documents/e
ducation/news/argus_11jan04_cost_of_living_lett
er_to_editor.pdf>, accessed 15/10/2019.
4
Carlton & United Breweries, Corporate Avoidance
of the Fair Work Act Submission 156 (2017)
minimum, and workers being refused a
pay increase in the form of a rise in
number of hours worked, it is plausible to
say that these local workers were
impacted by the formation of this
oligopoly. While this reluctance has an
impact on the workers of Carlton United
at the time, it is to be noted that Carlton
United did indeed raise its wages for its
employees.4 While the employees of
Carlton United experienced this pay rise,
the negative impact of the formation of
this oligopoly could be felt by companies
and workers external to the
conglomerate.
It is important to look to these examples
in the past of businesses behaving in such
a manner, as it provides a precedence in
which to examine modern case studies
that exist today.
Oligopolies can have the same
characteristics similar to that of a
monopoly, with the two being confused
often.5 Australia currently does not have
anti-trust laws preventing the formation
of monopolies, unlike the United States.
However, the Australian government
created the Australian Competition and
Consumer Commission in 1995, which
monitors businesses and organisations to
ensure that their conduct is lawful and
honours the ethics of the law6. This
independent watch dog holds
organisations accountable for their
<file:///C:/Users/Administrator/Downloads/Sub15
6.pdf>
6
Australian Competition and Consumer
Commission, ‘About the ACCC’, Australian
Competition and Consumer Commission [website],
(2019), para.3, <https://www.accc.gov.au/about-
us/australian-competition-consumer-
commission/about-the-accc> accessed 19 Oct.
2019.
business dealings. However, this
commission did not exist in the prior to
1995. When oligopolies are formed, a side
effect of such a merger is that the prices
of those products can increase, meaning
that consumers spend more money on an
existing product. Such an act is called
price fixing, which enables an organisation
to set its prices within a limited
competitive field with little chance of
sparking a trade war with its fellow
competitors.7
wages for workers. As a result of these
wages and working conditions the
workers went on strike in protest.
Castlemaine Perkins’ operations took
significant damage, up to 25% drop in
profits as a result of the protest, since
their manufacturing process was
interrupted.9

Returning back to the past, while not

directly having an impact on competing
businesses oligopolies can have indirect
effects on communities. In 1925, Carlton
and United Breweries bought out
Fitzgerald’s Brewing and Malting Co,
Castlemaine and closed its doors.8 This
closure resulted in employees losing their
employment and way of supporting not
only themselves but their families as well.
This loss of job would have been
detrimental to the workers of the
Castlemaine community, as the time (Figure 3: Castlemaine XXXX Beer was
period in which this took place was one of widely popular in Australia, but the brewery
significant financial struggle. later faced financial hardship).

As a result, the brewery shifted its
operations to Brisbane. Aside from the
workers that were affected by the closure
of the brewery, the relocation and
pressure from Carlton United on
Castlemaine Perkins to remain
competitive pushed the company to turn
to cost-cuts. This meant stagnant, low
It was not Carlton United that directly
caused this strike to place and the lower
wages that caused it, this is true.
However, in an indirect manner, the
formation of Carlton United, and the price
fixing which took place years after the
formation did have some influence over
the operations of Castlemaine Perkins.

7 9
Economics Online, ‘Oligopoly’, Economics Online ‘Castlemaine, Perkins Profit Fall’, Sunday Mail,
[website], (2019), para. 1 ‘The Sunday Mail Classified Advertisements’, 25
<https://www.economicsonline.co.uk/Business_ec Dec. 1938, A3, in Trove [online database], accessed
onomics/Oligopoly.html>, accessed 19 Oct. 2019. 19 Oct. 2019.
8
‘Fitzgerald’s Brewery’, The Register, ‘Trade,
Finance, and Mining’, 19 Feb 1925, A2, in Trove
[online database], accessed 19 Oct. 2019.
With Carlton United holding the
predominant market share of the time,
While this price increase existed during
and setting increasingly competitive prices
the time period when the company was
on their products pushed Castlemaine
known as the Society of Melbourne
Perkins to cut costs and edge closer to
Brewers, the price increase certainly
fully shutting down.
would have had an impact on the local
While Carlton & United was not the only community at the time.
beer maker within Australia at the time, it
This pattern of Carlton & United
certainly was the most prominent at the
purchasing competing breweries around
time10. This form of business can begin to
the nation was commonplace, as it was
similar to that of an oligopoly, as the
not only Fitzgerald’s Brewing and Malt
company controls the majority of the
Company that was bought out then shut
market share. Such an affect can mean an
down by Carlton & United. Other
organisation starts to raise prices to
breweries were often bought out by such
become more profitable. By not having
as Hodges Brother Breweries in Geelong
rival organisations to compete with, the
(1925) and the Ballarat Brewing Company
pricing of the products produced by a
(1958)13. As these breweries ceased
company can steadily increase.11 While it
operations, the people who worked in this
is true that Carlton & United did not lay
breweries found themselves without work
off any employees due to the economic
and means of providing for themselves.
climate at the time, it did however push
Not all buyouts of businesses dictate the
the prices of the products within its
end of employment for the workers of the
range.12
business that has been bought out, it is
possible that workers are rehired and kept
on to work for the new parent company.
Yet despite this, when a company is
bought out and the operations are
brought to a close, it is the workers who
are left without jobs. Without work and a
high rate of unemployment, the workers
and their families would have experience
significant hardship.

(Figure 4: The Carlton Brewery in the heart

of Melbourne).

10
Keith M. Deutsher, The Breweries of Australia
(Port Melbourne: Lothian Books, 1999), 130-132.
11
Federal Trade Commission, ‘Competition
Counts’, Federal Trade Commission, (May. 2015)
<https://www.ftc.gov/system/files/attachments/c
ompetition-counts/pdf-0116_competition-
counts.pdf>,para. 4, accessed 19 Oct. 2019.
12
‘Breweries Pool’, The Australasian, ‘Trade and
Finance’, 5 Dec. 1903, 39, in Trove [online
database], accessed 19 Oct. 2019.
13
Keith M. Deutsher, The Breweries of Australia
(Port Melbourne: Lothian Books, 1999), 134.

Many communities these days are
supported by the production of local
breweries. They employ local people and
bring money back into the economy. It has
only been within the last decade that the
craft beer industry has begun to expand
and diversify the beer market.14 This
sudden expansion within the liquor
industry was overdue, as the grown and
development of boutique breweries was
stifled by the looming competitiveness of
the oligopolies that existed in the liquor
industry during the 20th century.
While oligopolies are able to keep prices
consistently high if there is little
competition, if some competition does
present itself an oligopoly is able to
reduce its prices to outmatch the new
competitor. While this would reduce the
overall profits that an oligopoly could
receive, it did also mean that an
oligopoly’s competitor would feel
pressured to follow suit and reduce prices
to remain competitive or keep prices the
same and hope that consumers select
their product. This competitiveness can be
fatal for new businesses, which
characteristically have little capital to
absorb a price drop.15
By maintaining an economic environment
that stifles emerging companies and
competition within an industry, those
communities who need the newly formed
14
Nick Oscilowski, ‘A Short History of Craft Beer in
Australia’, Vintage Cellars [website], (1 Sept. 2017)
<https://www.vintagecellars.com.au/grapevine/be
er-and-cider/a-short-history-of-craft-beer-in-
australia>, accessed 19 Oct. 2019.
company for income will most likely
struggle.
While Oligopolies are not the same as a
monopoly, they do share some similar
characteristics with each other. It is these
characteristics that impact small
(Figure 5: An advertisement showing a
Carlton XXXX Bitter Ale on draught, or “on
tap”).
communities and people within these
communities. Companies like Carlton &
United may often not directly have sway
over the operations of its competitors, but
when a company of that size flexes itself
on competitors, there is often little choice
between bowing out of competition or
risk taking a loss. Keeping prices
competitive is a major goal of a business,
however if the competition has priced its
products extraordinarily low, then those
organisations either reduce their prices
also and face the consequences (as seen
in the riots of the Castlemaine Perkins
brewery in Queensland).
15
‘Start-up companies in Australia’, Angel
Investment Company [website], (2019)
<https://www.australianinvestmentnetwork.com/
start-up-companies-australia>, accessed 19 Oct.
2019.
Mergers and take overs are very common
within the economy. But when a business
is bought out by another, and the newly
purchased organisation is closed down,
the workers who were reliant on that
business for their income may struggle to
make ends meet. With competing
businesses bought out and shut down, the
amount of new companies forming to
provide competition within a particular
industry lowers. For the brewing industry,
having the market share dominated by a
handful of large organisations creates a
difficult environment for an emerging
brewery to gain a foothold in the market.
Some of the liquor oligopolies have
provided Australians with much beloved
(Figure 6: Australian Soldiers enjoying cans
beers, Victoria Bitter, Carlton Draught.
of Victoria Bitter in Vietnam 1965).
These beers are priced competitively for
the market, but what real cost did these
beers have on the small communities that
make up the backbone of Australia?
Reference List:

Primary Sources:
- ‘Castlemaine, Perkins Profit Fall’, Sunday Mail, ‘The Sunday Mail Classified
Advertisements’, 25 Dec. 1938, A3, in Trove [online database], accessed 19th Oct.
2019.
- ‘Fitzgerald’s Brewery’, The Register, ‘Trade, Finance, and Mining’, 19 Feb. 1925, A2,
in Trove [online database], accessed 19 Oct. 2019.
- Householder, ‘Cost of Living’, The Argus, 11 Jan 1904, para. 1, <
https://www.fwc.gov.au/documents/documents/education/news/argus_11jan04_co
st_of_living_letter_to_editor.pdf>, accessed 19 Oct. 2019.
- Cartlon & United Breweries, Corporate Avoidance of the Fair Work Act Submission
156 (2017), <file:///C:/Users/Administrator/Downloads/Sub156.pdf>, accessed 19 Oct.
2019.
- ‘Breweries Pool’, The Australasian, ‘Trade and Finance’, 5 Dec. 1903, 39, in Trove [online
database], accessed 19 Oct. 2019.
-

Secondary Sources:
- Australian Competition and Consumer Commission, ‘About the ACCC’, Australian
Competition and Consumer Commission [website], 2019,
<https://www.accc.gov.au/about-us/australian-competition-consumer-
commission/about-the-accc>, para. 3, accessed 19 Oct. 2019.
- Economics Online, ‘Oligopoly’, Economics Online [website], (2019),
<https://www.economicsonline.co.uk/Business_economics/Oligopoly.html>, para. 1,
accessed 19 Oct. 2019.
- Deutsher, Keith M., The Breweries of Australia (Port Melbourne: Lothian Books, 1999), 130.
- Deutsher, Keith M., The Breweries of Australia (Port Melbourne: Lothian Books, 1999), 132-
134.
- Federal Trade Commission, ‘Competition Counts’, Federal Trade Commission, (May. 2015),
<https://www.ftc.gov/system/files/attachments/competition-counts/pdf-
0116_competition-counts.pdf>, para. 4, accessed 19 Oct. 2019.
- Moloney, John, The Penguin Bicentennial History of Australia: The Story of 200 Years
(New York, The Viking Press, 1987), 219.
- Oscilowski, Nick, ‘A Short History of Craft Beer in Australia’, Vintage Cellars
[website], (1 Sep. 2017), < https://www.vintagecellars.com.au/grapevine/beer-and-
cider/a-short-history-of-craft-beer-in-australia>, accessed 19 Oct. 2019.
- ‘Start-up companies in Australia’, Angel Investment Company [website], (2019) <
https://www.australianinvestmentnetwork.com/start-up-companies-australia>, accessed 19
Oct. 2019.
Figure List:
Figure 1:
- Victoria Bitter engine room, 1938, in State Library Victoria [online database],
accessed 20 Oct. 2019.
Figure 2:
- ‘Importation of Malt.’, The Worker, ‘Victorian Breweries’, 5 Mar. 1908, 26, in Trove
[online database], accessed 14 Oct. 2019.
Figure 3:
- Castlemaine XXXX Sparkling Prize Ale label, date unknown, in State Library
Queensland [online database], accessed 20 Oct. 2019.
Figure 4:
- Exterior view of the Carlton Brewery, 1921, in State Library Victoria [online
database], accessed 20 Oct. 2019.
Figure 5:
- Carlton XXXX Bitter Ale Advertisement, 1906, in Trove [online database], accessed 19
Oct. 2019.
Figure 6:
- Shannon, Michael Barry, 1965, Australian War Memorial, in Australian War
Memorial [online database], accessed 21 Oct. 2019.